Let's trade using computer science!

coensio

My first 100% automated and 100% accurate workflow, StrategyQuant test case


DISCLAIMER: The presented results below are still preliminary, there is still a small chance that my positive results are influenced by an undiscovered bug in the current version of SQ-X (build 118.84) or that I’ve just made a stupid mistake somewhere in my workflow resulting in a huge ‘Data Mining Bias’. However I did my best and rechecked everything multiple times…Moreover since this all is based on a relatively new ‘custom projects’ feature of SQ-X, nothing of this has been tested yet on a real account…but I think I have built a strong case supporting I could be right on this one 😉

My claim: It looks like I’ve managed to create a 100% automated and 100% accurate workflow using StrategyQuant feature called ‘custom projects’.

100% automated means: I push 1 button before going to bed, and every morning my workflow automatically generates, validates and selects few new strategies which are ‘ready to go’

‘Ready to go’ means: I can deploy them immediately to my live account. Without a need of further processing.

100% accurate means: Every single strategy that has been selected by this automatic workflow (~50 so far), has been profitable in the 2 years period from the generation date.

To test this all I’ve adapted my SFT method as described in this topic: See HERE.

The workflow is based on standard validation test (common knowledge) as shared by SQ team in their free courses, however with a very rigorous settings. The workflow does not use any advanced validation methods like WFA,WFM,OP,SPP. Instead a customized Monte-Carlo test is used to simulate behavior of a SPR method. No portfolio analysis is performed (some systems can be correlated).

My automatic workflow test case is split into two verification moments:
1. End of year 2014.
2. End of year 2016.

At each point in time 1 and 2, I used my workflow to automatically generate and select 20 NEW strategies (out of several hundreds thousands systems) without ANY manual intervention and then ALL of selected systems where forward tested using SFT (future data). Let me be clear on one thing: I did not cherry picked any strategies.

It seams that every single selected strategy was profitable in the period following the selected generation date. See figures blow:

Test case 1: Strategy creation @ 2014.12.31, Simulated Forward test: 2015.01.01…2016.12.31.
Real-Ticks (Dukascopy data), Real-spread (no commissions)




Test case 2: Strategy creation @ 2016.12.31, Simulated Forward test: 2017.01.01…2018.12.31.
Real-Ticks (Dukascopy data), Real-spread (no commissions)



My conclusions so far:
1. If there are no mistakes, then it seems that it is totally possible to use SQ-X automated ‘custom projects’ to automatically generate and select profitable trading systems.
2. No advanced validation/filtering methods needed. Of course these tests should only improve total result and minimize DD on portfolio level.
3. The results in SFT of >2014 are slightly better than >2016. Workflow is somehow sensitive to used data during strategy generation (due to changing market condition). It seems that years 2017 and 2018 are very difficult years for trading using selected trading type.
4. It is not 100% proven yet, but it’s a pretty damn good result so far, taking into account it’s based on a simple workflow that is using basic filtering principles.
5. Some of the strategies can be correlated, but for the sake of this investigation no manual correlation filtering has been performed. This would jeopardise the objectivity of this test case.
6. The filtering settings are very rigorous, this workflow filters out only the most robust strategies. According to my statistics only 0.05% of the generated strategies are able to pass this workflow.

TODO:
– Refine the workflow and implement further strategy selection, perform correlation tests, WFM analysis and additional portfolio level related tests.

Greets,
Chris
forum.coensio.com

Simulated Forward Test

How to test your strategy development process to see if your are really a profitable system trader?

Hereby I want to propose a validation method called ‘simulated forward test (SFT)‘. (Note: This is not WFA or WFM, WFA/WFM is a different topic, this is also not an additional OOS test as used during strategy generation since the SFT period is not used for strategy selection)

Simulated forward test is basically a ‘walk forward’-like test of your ‘total strategy design workflow/method’.

In the last few months I tried to develop a fully automated workflow using SQ-X ‘custom projects’ module and I got very interesting results (which I will post in another topic). My small breakthrough was based on an observation that majority of traders, and even experienced traders giving online courses, just assume they are right about their strategy validation method based on their experience and their past results. There is nothing wrong with that assumption, but it can be killing for new traders or people who are trying to design their own strategy design methods.

What you normally see is the following development sequence:

1. All traders have their own ideas or methods for generating strategies and they use these methods to generate their new automated trading systems.

2. In 90% of all cases, new traders generate and run their systems on demo (or small live) accounts to see if their strategies are profitable or not.

3. This results in a ‘generate & hope’ methodology.

In my opinion the proper approach should be as follows:

1. At first you need to develop or learn a new strategy design workflow (a new system design method or process including strategy generation/testing/validation and strategy selection).

2. In order to test if your method works you go back in time and pretend to be living in the past, e.g.: 2014. This is your point of reference.

3. Then you develop a sufficient (significant) amount of strategies using your workflow using data <=2014. In this case using data >2014 is forbidden to prevent any type of ‘Data Mining Bias’.

4. Then you test ALL strategies that have passed your workflow and strategy selection on a simulated forward period (your simulated future) >2014 and verify how many of selected strategies have worked for you. You do this without cheating or fooling yourself, so you use ALL strategies that have passed your workflow successfully. You draw your conclusions based several different pass/fail criteria that are important for you e.g.: Max DD, Net Profit, Red/DD, Stagnation etc….and you write down the effectiveness percentage of your workflow e.g: 65% of selected strategies were profitable (or did not exceeded Max. expected DD) in the simulated future.

5. You repeat the whole process by selecting a different point of reference in the past e.g.: 2016. And start all over again by generating, testing and selecting new strategies. Then you test again ALL of the selected strategies in a simulated period >2016.

You can repeat this process many times, by ‘walking forward’ your whole workflow in time using historical data and see if your strategy generation method really produces robust strategies in a simulated forward period.

An example of time slots as used in a typical workflow:

Simulated Forward Test

– Point of reference (in the past) = 2014.12.31 (you are forbidden to use data > 2015.01.01 until you have generated 30 strategies that passed your workflow and selection method for live trading, this can be including portfolio building methods)

– Your first IS/OSS for strategy generation is e.g.: IS: 2008.01.01…2011.06.01 and your first OOS is 2011.06.02…2014.12.31. 

– Your second OOS2 for cure-fitting check is e.g.: 2003.01.01…2007.12.31

– All other validation tests (spread,skipping trades, MC, cross market etc..) are done using data <=2014.12.31

– You select 30 strategies and test them ALL on data >2015.01.01

After you are confident with your workflow and your results you can jump-back to present time and generate/validate and select new strategies and feel confident that selected systems have a significant chance of being profitable in the upcoming future.

Just wanted to share this because this approach has led to my first small breakthrough with my 100% automated workflow.

Conclusion: stop fooling yourself, stop generating strategies based on untested methods and stop hoping those will work out for you well in the future…

Any comments are welcome 🙂 Visit our forum HERE.

Gr

Chris

Free StrategyQuant X crash course 2019



  1. When you join our community, you get an illustrated step-by-step guide on how to ‘jump start’ your own strategy generation process.

  2. You will be able to download free strategies generated by other forum members! Including a start-up package with 50 example strategies and 3 strategies which are ready to go.

  3. You get our new SQ-X workflow template that has proven to produce interesting results on EURUSD.

  4. You also get access to additional algo-trading lessons, where you will learn the basics of systematic trading.


So why we do it for free? What’s the catch?



1. Because we are passionate about algorithmic trading.
2. Our mission is to share knowledge and learn from each other.
3. Strategy generation takes time and lots of computing power. With more active forum users and more computers working in parallel we can generate and test more strategies.

free algo-trading course 2019

To join this free course please subscribe to our free algo-trading forum.



Note: After short registration you will recieve an email with further instructions. Make sure you have received the activation email! Otherwise mail to: info(at)coensio.com.

Will a free trading group help us?

How about we create our own!

After many years of EA coding for other traders (also for many of you) I think, I have seen it ALL. I have seen people creating EA’s and strategies based only on one chart screenshot or just because they have read something on a ‘forum’. Obviously it doesn’t work!

Now I’m fully convinced that the only proper way to go is automatic strategy generation and testing.

But this method is also not perfect, it is like trying to find a needle in a haystack. Learning curve takes several weeks, finding robust strategies takes several days, testing takes up to several months.

So why not to combine our efforts?

Here is my idea: I want to create our own private forum, our own trading group where we can share ideas, experiences and knowledge. A real gentleman’s (and ladies) club for serious traders.

YOU CAN JOIN HERE: Coensio’s Algo-Trading Group


I want to concentrate only on automatic strategy generation. This is how ‘they‘ do it. This is how EA vendors find their strategies, this is how professional quants and algo-traders design their strategies. 

So if there is any chance you are already using StrategyQuant platform, and you want to join this club, just let me know (reply to this email). I am looking for experienced traders and also for forum moderators.

I’m still learning this platform especially the new ‘SQ X‘ version, so the only thing I can promise you, is that I will share my knowledge for free. Starting from 2019 I will also prepare some kind of free algo-trading course.

For traders which do not know what I am talking about, please read my review of this platform: HERE. I also provide 20% discount + other bonuses for people that want to purchase this platform, but first download a demo version and see if this way of working will work for you.

ATTENTION: If you will use my discount code you will get ArrowHunterEA and CoensioMt4Charts for free: COENSIO-20-OFF-ZSHXY

You can read more on my blog. or join here:
Coensio’s Algo-Trading Group

Regards,

Chris
www.coensio.com
forum.coensio.com

Coensio MT4 charts  
Start monitoring your trading systems!

This tool allows you to generate equity graphs and to monitor all interesting
statistics of every trading system on your MT4 account.
 

Click on the figure below to see it in action!

This tool is an MT4 compatible indicator which can be attached to any chart to any timeframe. The generated report is a .html file, which is stored locally in MT4 folder.


Features & calculated statistics

  1. Generates charts of all (or selected) trading systems by Magic number.
  2. Total Profit, DrawDawn and WinRate.
  3. Wins, Draws and Losses. 
  4. Long and short trade profits.
  5. Swaps and commissions.
  6. Daily and hourly Profit/Loss overview.
  7. System selection by Magic Number, LotSize or Start Date
  8. Possibility to add custom comments for each system!


F.A.Q

How this tool works?

This tool is an MT4 indicator that can be attached to any MT4 chart using any timeframe. On each new candle the indicator generates a full report which is stored as a .html file in local MT4 directory.

Can I get a demo version?

Yes a DEMO version of this indicator is available in the download link below. After a short registration you can test it with your favorite indicator on AUDUSD pair. DEMO version is limited to 3 systems only!

Does it run on multiple MT4 accounts?

After purchasing the CoensioMt4Charts indicator, you will get your own License Key which will be linked to your personal MT4 account. This means 1 License Key is valid only on 1 MT4 account, at a time. You can always change your MT4 accounts, by sending me an email (without any additional costs).

How many systems can run on one MT4 account?

In theory MT4 platform supports up to 100 different charts (=100 different tradings systems).

Which web browsers are supported?

The CoensioMt4Charts indicator has been successfully tested on: Firefox, MS edge, Chrome and Safari browsers. It should work on any other moderrn browser.


Test or Purchase 


Purchase NOW and get all future releases for free! 

Purchase FULL version for just €25

After purchase you will be redirected to a ThankYou page where you will get your LicenseKey and a direct download link. The fileformat is “ex4”, suitable with MT4 platform. Note that 1 LisenseKey can be used with one MT4 account. You can change your MT4 account any time.
Get a free DEMO version
CoensioMt4Charts demo
If you are running demo version make sure the LicenseKey indicator parameter is set to ‘DEMO’ and you have entered valid email address in EmailAddr field. After that go to your mailbox and activate this product by clicking on the provided link in the welcome email. Check your spam folder!




Settings: 


  1. EmailAddr: Your valid email adddress.
  2. LicenseKey: Your valid product LicenseKey.
  3. GraphFile: Name of .html file output. E.g: ‘MyCharts’
  4. CalcFromThisDate: Start date from which statistics are generated.
  5. MagicsToCheck: Magic numbers that need to be analysed. E.g: ‘2335,33344,234,…’. Empty = All systems.
  6. FilterByLotSize: Allows to filter all trades by specific lot size. E.g.: 0.1 or 0.01.
  7. TimeHourOffset: Time offset in hours of the MT4 broker, used to synchronise time visible on charts.




Installation guide: 


  1. STEP 1: Copy the downlaoded indicator to your local indicator folder.
  2. STEP 2: Enable DLL imports.
  3. STEP 3: Enable All MT4 account history.
  4. STEP 4: Add CoensioMt4Charts indicator to any chart.
  5. STEP 5: Open generated report with your favorite web browser.



For Product Support, please contact the vendor HERE

For Order Support, please contact ClickBank HERE

CLICKBANK® is a registered trademark of Click Sales, Inc., a Delaware corporation located at 1444 S. Entertainment Ave., Suite 410 Boise, ID 83709, USA and used by permission. ClickBank’s role as retailer does not constitute an endorsement, approval or review of these products or any claim, statement or opinion used in promotion of these products.





© 2019 www.coensio.com

Free Video course: How to prevent curve-fitting

And how to properly optimize trading systems

Curve-fitting is the most common mistake made by inexperienced algo-traders. This is because the MT4 based optimization is nothing else but pure curve-fitting.

Curve-fitting is a fancy name for cherry-picking (or ‘falsely’ connecting the dots), where you optimize your system using all possible combinations of all parameters and you select only the best results, the highest profits or the best looking equity charts.

This topic is so huge I can write a book about it. But let’s keep it very pragmatic for now. Because you are here to see some results. So, without going into details here is the approach that I use to keep cure-fitting minimized:

  1. Keep the number of optimized parameters as low as possible: each new parameter which is optimized adds an additional degree-of-freedom (or dimension), in which equity graph can be curve-fitted.
  2. Following the logic of point 1: avoid complex trading systems with many parameters and dependencies. Keep it simple!
  3. Split your historical data range in: ‘in-sample’ and ‘out-off-sample’ periods: the in-sample period is the longest period where you run your optimization. The out-of-sample period is the period where you will validate your settings after the optimization.
  4. Make sure you have sufficient amount of historical data. Note that you need at least 100 trades in your in-sample period, which is minimum required amount of trades needed for statistical significance. More is better.
  5. Optimize for profit-growth stability not for the maximum profit. In the end you need to see a straight equity line with stable increase over the whole testing period. (During optimization the ArrowHunterEa returns a custom ‘profit-factor’ in OnTester results column, which determines the stability of growth)
  6. Perform a robustness test on optimized parameter set. This can be done by manual ‘monte-carlo’ like simulation using the MT4 tester.

I know it is a lot of info in one post. That is why I have prepared a free video course for you with an real life example of strategy optimization.

Video I:

https://www.youtube.com/watch?v=XG9O0-RXzjE
Video II:

https://www.youtube.com/watch?v=DFWj7dLq-KQ
Video III:

https://www.youtube.com/watch?v=Rcc9ELW2WoQ

Greets!
Chris
www.coensio.com


Altcoin maximum price calculator



This tool calculates the maximum theoretical price estimation for monero coin, with an assumption it will reach the same marketcap as Bitcoin with a similar supply level. The equation is:

MaxPrice(monero) = MarketCap(BTC) / (SupplyLevel(BTC) * MaxSupply(monero))
Note1: if "Supply" is equal to "MaxSupply" like for monero coin, then SupplyLevel(BTC) is set to 1
Note2: if "Supply" > "SupplyLevel(BTC)", then SupplyLevel(BTC)* MaxSupply(monero) = "Supply"

SymbolParamValue
BTCPrice($): 8442.24
BTC MarketCap($): 153452M
BTC Supply: 18M
BTC MaxSupply: 21M
BTC SupplyLevel: 86.56%
SymbolParamValue
XMRPrice($): 62.28
XMRMarketCap($): 1084M
XMRSupply: 17M
XMRMaxSupply: 17M
XMRMaxPrice($): 8812.88


Usage: https://www.coensio.com/wp/altcoin-price-calculator/?ticker=TICKER, or click one of the tickers below:

GROWTH POTENTIAL (ROI) RANKING TABLE TOP 200:

monero *
x141.51


steem
x2673.65


verge
x2644.16


digixdao
x2589.34


centrality
x2380.37


siacoin
x2334.21


enjin-coin
x2287.8


monacoin
x2027.17


beldex
x1876.86


counos-coin
x1830.03


lisk
x1817.65


waves
x1783.78


nano
x1730.07


nexo
x1718.14


abbc-coin
x1710.3


bytom
x1647.93


theta
x1627.56


multi-collateral-dai
x1598.8


breezecoin
x1597.4


iostoken
x1593.72


hypercash
x1562.04


seele
x1542.16


bitcoin-diamond
x1493.23


v-systems
x1484.09


icon
x1470.31


holo
x1444.48


dxchain-token
x1430.61


omisego
x1379.44


komodo
x1326.9


digibyte
x1306.62


crypto-com
x1223.27


1irstcoin
x1211.56


nervos-network
x1118.26


noah-coin
x1103.28


trueusd
x1096.6


thorecoin
x1077.88


molecular-future
x1054.77


augur
x1044.47


kucoin-shares
x995.91


synthetix-network-token
x910.92


horizen
x845.89


qtum
x836.48


bitcoin-gold
x831.54


eternal-token
x819.03


0x
x768.3


mixin
x754.8


flexacoin
x731.5


paxos-standard
x727.5


tagz5
x703.45


dogecoin
x543.98


glitzkoin
x534.77


basic-attention-token
x509.31


bittorrent
x503.85


decred
x480.23


nem
x417.96


cryptonex
x412.05


zb-token
x367.68


vechain
x367.12


usd-coin
x339.63


maker
x334.13


ravencoin
x328.03


swipe
x325.54


dimension-chain
x306.41


gaps
x284.49


ontology
x280.78


mindol
x249.97


algorand
x244.94


iota
x236.53


fabrk
x234.31


ftx-token
x232.6


okb
x210.32


unus-sed-leo
x172.72


cosmos
x169.59


neo
x166.4


zcash
x166.19


folgory-coin
x163.43


tezos
x140.21


thorenext
x133.1


prizm
x121.28


huobi-token
x111.98


tron
x108.51


ino-coin
x108.24


tap
x106.74


ethereum-classic
x94.83


dash
x91.55


cardano
x90.06


999-coin
x89.83


hedgetrade
x72.9


chainlink
x72.01


stellar
x59.6


binance-coin
x55.46


eos
x45.46


crypto-com-coin
x38.01


litecoin
x37.37


insight-chain
x36.89


tether
x33.1


bitcoin-sv
x29.31


bitcoin-cash
x24.95


ethereum
x8.57


xrp
x7.82



Data source: coinmarketcap.com




The best crypto exchange
(Europe-based, trusted cryptocurrency market)




This article explains how to buy cryptocurrencies including the most popular Altcoins on a reliable European crypto exchange market called: LiteBit.eu. This market supports the following payment methods: iDeal, SEPA Bankwire, SOFORT, GiroPay, Bancontact and MyBank.LiteBit.eu

DISCLAIMER: I wrote this article myself, and it expresses my own opinions.Trading and investing in cryptocurrencies always comes with the big risk of losing invested capital. Buy cryptocurrencies at your own risk!


Below a step-by-step guide on how to purchase cyptocoins:


Step 1: Create your free account
Go to
LiteBit.eu website and click “Create new account”:
LiteBit registration 1
Fill your personal information:
LiteBit registration 2
Complete your registration by clicking activation link in your email box:
LiteBit registration 3

Note: In some cases before purchasing your first cryptocoins you need to complete at least “Tier 1”, verification. During “Tier 1” verification the system will send you a SMS with a short code you need to enter in order to proceed with purchasing crypto’s. You can complete “Tier 1” step, under “My account > Verification & Limits” page. Click here for direct link.



Step 2: Getting a free cryptocoin wallet
A “wallet” is a tool which is connected to an online decentralized ledger (database) and it is
used to store, send, or receive digital currency. The safest option is to get an offline wallet for each given currency type. However this requires installing many tools (since each cryptocurrency has its own wallet software) and storing information on external USB drive.  The easy way is to use free online wallet inside your LiteBit.eu account. Go to “My Wallet” tab and click on “Deposit” button for selected cryptocoin. 
LiteBit make wallet 1
After that you need to hit “generate” button in order to generate a new wallet address for selected currency. Note: in all cases you can always transfer your funds from

LiteBit.eu account to your offline wallet or a wallet software installed on your PC.
LiteBit make wallet 2
Step 3: Purchasing your cryptocoins
To purchase any desired cryptocoin just go click on currency symbol  in the main window, for this example: XRP icon:
LiteBit buy crypto coins 1Then fill in the required information like: amount of coins to buy, your payment method, your wallet address and hit “Next”.
LiteBit buy crypto coins 2
Note: Do not forget to check the “I agree” checkbox.

After that you can proceed with your usual payment routine:

LiteBit buy crypto coins 3

Step 4: Checking transaction status
To check if your transaction is finished, you can go to “My account > Order History”:
LiteBit buy crypto coins 4
Note: Depending on the crypto currency it can take few minutes to few hours to complete the transaction! Remember that each transaction need to be confirmed by crypto currency “miners” and it can take some time.



Conclusion:
The
LiteBit.eu is an easy, fast and reliable currency exchange market. It is based in europe which gives another level of confidence when compared to Asian based exchanges. I hope this guide will help you buy you first cryptocurrency without any problems.

P.S.: if you want to thank me by sending me 1 ripple ($0.20), my ripple address is:
rUqa1eMA6BaUScFWbwi3LBcSuUuA4Rvna6

Greets,
Chris


How to backtest & optimize in MT4




Just like me, many of you are using the MetaTrader platform for daily trading using Experts Advisors. However, not many people know how to backtest in MT4 properly. In this short blog I will try to explain you the logic behind the EA optimization process on a MetaTrader 4 or 5 platform. If you do not know how to run the strategy tester on your MT4 platform then there are many places to go like YouTube to learn from. This article explains only the optimizing steps needed to get the best results during the optimization.

So here we go:

  1. How to approach mt4 strategy tester optimization
  2. Is 99% tick data accuracy one big lie?
  3. What level of tick data accuracy is needed for backtesting?
  4. Putting it all together

1. How to approach mt4 strategy tester optimization?

I will explain it on a simple example. Imagine we have a given trading system with the following trading results.
Backtesting in mt4
Now imagine today is the point where we have drawn a red vertical line. Of course we can not predict the future and the only thing that we can see are the backtested results from the past. So how can we make sure the optimized EA results are not curve-fitted and the optimized EA parameters have any chances of being profitable in the future? Let’s split our optimization process in two steps.
Strategy optimization steps
STEP 1:
Optimize a given trading strategy on a small historical data fragment, from a given date in the past (Start) until today (End). It is extremely important that the number of trades in the selected period is representative for the given trading system. You need to optimize using  at least 10% of the total number of trades which have occurred within history data range.

STEP 2:
Test if the optimized parameters found in STEP 1 are not curve-fitted! Yes, this is my big secret magic trick, that I use in my all trading systems, so read and think about the following sentence for a while, let it sink in:

If you can predict the past = most probably you will be able to predict the future!

Basically, if I see nice results on a backtest using history data which was never used during the optimization (so called out-of-sample period), then it gives me confidence, that selected set of parameters could also be profitable in the feature.

2. The 99% tick data accuracy is one big lie!

In my early days when I was just starting my adventure in automated trading, everybody was saying (and still is) “You need to use 99% tick data to backtest properly, 90% is garbage etc..etc…”. I was like: ohh man..I need always to have 99% modelling quality! I was obsessed by tick data accuracy. I spent hundreds of dollars on tools which gave me 99% accurate tick data….but then I’ve discovered the following:

The 99% accuracy visible after a backtest is
just a number in the FXT file header!
tick data modeling accuracy
And moreover what does it mean to have 99% of accuracy? The answer is: it doesn’t mean anything! It is just representation of tick modeling quality for the broker where the tick data comes from and in almost all cases it is Ducascopy tick data.
Furthermore in most cases people will use different broker with different tick prices, spread, latency etc…So 99% backtest data modeling is a myth, but 99% data is not entirely useless, read the flowing point.

3. What level of tick data accuracy is needed for backtesting?

There is one good answer: in best-case scenario you want to use the real broker live account data ticks. However this is only possible if:
  • You are using MT5 platform and run your optimization using: “Every tick based on real ticks” mode. (Even then, most brokers provide slightly “adjusted” tick data, so no, they will not let you win that easy, hehe)
  • Your broker will provide you the real recorded tickdata from a live account. (It does not happen a lot)
  • You know how to record live tick data by your self and know how to export it to strategy tester. (Too difficult for most people)
If you can not use one of above mentioned options, then a simple alternative, is to simply test your history tick data for accuracy. The key word is: results correlation.

In order to test your historical data for accuracy just run the following simple test:
  1. Run your (or any other) EA on a live account on a selected broker. To minimize the potential losses minimize the lotsizes of open positions.
  2. Collect the live trading results for at least few days (or even weeks) in order to capture different market moods and events.
  3. After that, backtest the same EA using exactly the same EA settings and using the same time period! (In this step you can use 99% modeling or the tick data you currently have)
  4. See how big are the differences in trading results between live and backtested data.
  5. If the difference in all critical parameters such as: number of trades (very important), drawdown and profit etc..are not that big, then your history tick data is sufficient to be used in optimization and backtesting. If the differences are significant, then you need to test it on a different broker or using different source of tick data.

4. Putting it all together

Trading strategy optimization and accurate result prediction is not an easy task, however it can really be achieved with a little bit of effort and practice. In order to achieve some level of confidence in your backtest, you need to make sure:
  1. Your EA settings are not curve fitted
  2. Trading results are also profitable outside your optimization period (in the past or the future)
  3. There is a good correlation between results from backtesting and optimization and the your live account
*** Bonus tip: The most important characteristic I’m using during selection of the best EA settings is the trading curve-shape! Ideally I want to see a straight line in upwards direction with as many trades as possible. If resulting trading curve has many dips (DrawDowns), then it means the strategy is risky since theoretically you could start your live trading precisely on a top before an upcoming DrawDown period and so blow up your account before making any profit. See a simple comparison between two different results below:


Greets,
Chris

P.S.: do not forget to like or share this article!


How to trade news




As you probably already know, there are many successful traders that trade on forex news from fundamental point of view. However, most of the traders get the concept of ‘news trading’ totally wrong and lose their money time after time. This is because they base their trading decision only on the fundamental market laws and fundamental analysis.

My statement: Trading by blindly following fundamental analysis is totally wrong!

In this article I will show you:

1. Why fundamental analysis does not work like you think it should?

Most people think that they can base their trades on a general fundamental view on the market and use few basic economic laws to predict the market direction. A simple example: when FED (The US Federal Reserve) raises the interest rates, the basic economic law says that the dollar should go up. This is because in this case, the dollar will become an attractive currency to hold (in any US bank) because of a high interest rate. In this scenario people would buy dollar and sell other currencies, dollar should go up!
fed raising rates
So let’s look at a real life example on what market does when FED announces a rate hike. For this example let’s look at the FOMC (Federal Open Market Committee) that took place on 15 March 2017 (Ms. Janet Yellen in the figure above). I have selected this example because March 15 was a very interesting day for a currency trader (but also for me personally). Below a screenshot from ForexFactory calendar:
FOMC news announcement
Click here to zoom in image

On that day, during a press conference at 8pm (CET time) the FOMC announced a new rate hike. The basic laws of economics say:

“When US interest rate goes up = dollar should go up = EUR/USD should go down”


So let’s look at the EUR/USD chart on that day in the evening:EURUSD rally
Click here to zoom in image

And the EUR/USD went up?? I guess many traders who were hoping to get few pips of profit on a stronger dollar were quite surprised 😉 So what happened here? Apparently the market did not read the book called: “basic economics” and the EUR/USD pair went up instead of down?

And this is where the most traders are losing their money. Because one thing that most traders do not know, is that there is a huge difference between ‘expected news‘ and ‘unexpected news‘ events! When analyzing the
EUR/USD price movement on that evening, we can see that two different news events happened almost simultaneously:

A. Expected news: (News with already expected outcome) FED raised the US dollar interest rate during the FOMC meeting. This was ‘expected news’, because long before this news event, in previous weeks and days, there were many market rumors, that Ms. Janet Yellen from FED will finally announce another ‘rate hike’ during her next presentation. And the most of analysts gave up to 80% of probability of rate hike long before the FOMC meeting took place. Basically this interest rate raise was already ‘priced in’ by the market and all smart traders long before the news event on March 15.

B. Unexpected news: (News with unexpected outcome) On the other continent (in Europe), Dutch parliament election were taking place (in The Netherlands). And there was a big element of surprise related to that event, because nobody knew if Dutch populist party PVV would win or lose those elections. In case of winning this would be a very negative signal for Euro-zone and Euro would drop very hard. However it turned well for all of us (especially me since I am an emigrant living in The Netherlands) and the populist party PVV did not win those elections! On that day I was watching the Dutch television with my laptop on my lap and just in few seconds after first official exit-poll was announced the Euro went up like crazy!
forex major news event

Very important note: in most cases the ‘unexpected news‘ is not a direct ’cause’ of the market move, but rather just a catalyst of market forces that were already in place. Secondly, the only thing, we can relay on is the correlation between the ‘news’ and the ‘move’! The market moves only when the ‘news’ is supported by market sentiment (the collective herd behavior of all market participants). This is the most important sentence on this whole page. Please try to understand this, and you will become much better trader. So, in the example above, the EUR/USD went up, because the unexpected and positive news was supported by the overall bullish bias for the euro. This market behavior is can be explained by the concept called ‘teflon euro‘ (just google for it), which means that in most cases, the market will use any valid excuse (any positive news) to buy euro.      

2. How to trade the market news?

Strategy A: scalping the market directly after the news:
One
way to trade the news, is to trade only on ‘unexpected news’ (news with an unexpected outcome) and to enter the market very fast! In most cases the first reaction to the news comes just in minutes/seconds after the news release. After few minutes you are already too late to scalp the market and there is a big risk of pull-back since people will take their profits after just few pips of gain. In order to be very fast you need to have access to real-time information. One platform I can recommend is RANsquawk forex news service. This service provides real-time ‘no lag’ information updates, so you can trade all news without any delays and never miss any trading opportunity. If you want to read more about this service read more here:
RANsquawk
RANsquawk banner
Promotion: Exclusively for Coensio blog readers RANsquawk offers extended 2 week trial of their great service! Contact info@coensio.com for more info.

Furthermore, my free version of hedging EA contains a news trading option that makes you able to preset trade entry conditions based on pending horizontal entry lines on chart. You need to disable recovery option by setting EnableRecovery to ‘false’ and enable news trading option by setting EnableNewsTrading to ‘true’. This is an ideal tool for trading news events. You can learn more and grab it for free HERE.

Strategy B: Trading the
correlations between the news and market moves:
This is my favorite news trading strategy, since it is easy, clear and effective way for trading the news. In this strategy you can trade the news in direction dictated by the prediction which is based on the previous news releases and previous market moves. So for example when a given forex pair move (after a news release with a given outcome) was the same or similar for all previous 10 news events, then you have an increased chance that it will happen again! Here is how it can be done:

Step 1: Find a high impact news event
In order to find all high impact news events, you can go to free
ForexFactory calendar and select only red flagged news. Then select any news event you want to trade oNews Trading step1
Click here to zoom in image

In this example let’s select ‘Michigan Customer Sentiment = UoM’ as our target.

Step 2: Find a correlation between the news and market move

This steps requires an external tool (see automatic selection below) or some data mining skills (manual selection).

Manual selection: For example you can use forex calendar filtering option to filter out only the selected news event for the past 12 months. Then you need to open a chart (on your MT4 platform) of the related currency (currency pairs) and mark all dates where this particular news event has happened. Then you need to seek for market reaction correlations by looking in which direction market has moved directly and within few hours after the news release.

Automatic selection: There are many tools that do this work for you. I’m using the “events & trade” portal which is available on my broker: markets.com. Here is how it looks like:

News Trading step2
Click here to zoom in image

This simple web portal not only tells you what are the best upcoming news trading opportunities, but it also analyses up to 12 previous outcomes and it calculates probability of profitable trading in direction dictated by the news. You can read more about this tool here: Visit “events & trade” website.
Events and trade
For this example we will target USDCAD pair which has a 80% probability (
for a profitable trade) in case when the ‘Actual’ value provided during the news will be higher than the ‘Consensus’ (the forecast) value. See figure below:
USDCAD trade prediction

Step 3: Setup your trade and wait for the news.
So in this example we can tell upfront that when the
‘UoM Consumer Sentiment’ news will result in a ‘Actual value > Consensus’, then we have a big chance that USD/CAD pair will move in the ‘BUY’ direction within 4h and 12h time-frames. Lets see what happened in this case:
News Trading step4
Click here to zoom in image

In this case the outcome from news was positive, since 98.0 > 97.1. Let’s see what was th reaction on USD/CAD on this positive news:
News Trading step3b
Click here to zoom in image

So in this case the price moved as predicted, this would result in a profitable trade!

3. How to avoid trading during news?

If you would like to avoid trading during the news releases and avoid fast market moves, you can look at my EaBlocker indicator. I have created a simple indicator that allows you to automatically disable AutoTrading during given hours and also on major market news releases.

You can read more about it on the product page: HERE.


4. Conclusions:

– To summarize we can say that forex market (like any other market) is driven by not more than three factors:

  • Long term forces dependent on global fundamental view (e.g: policy of central banks)
  • Short term rallies on unexpected news events (e.g: Geo-political events)
  • Market sentiment (I will discuss this in one of my next posts)

– For successful trading during news events you can use one of the following strategies:

– If you want to avoid trading during news, you can use my EaBlocker indicator.


Talks soon!

Chris

Follow me on Facebook:

mt4 programming service
Short about me

Welcome to my Blog!

My name is Chris, I'm an engineer, system trader and internet entrepreneur. I hope you will enjoy my website and my free MT4 software. Do not forget to check out my blog and our forum.
B.t.w: 'coensio' (Latin) = assessing, assessment, census, estimating, opinion, rating, taxing.

Get free coensio strategies!
StrategyQuant with discount!
ArrowHunterEA project
Coensio MT4 Charts
Follow me on Facebook!
My newsletter

Subscribe to my newsletter